IMF positivity returns in market

Stocks witnessed positivity from investors during the outgoing week, with hopes of similar sentiments continuing in the short week ahead on account of IMF loan expectations, analysts said.

Pakistan stocks witnessed positive momentum during the outgoing week while it is expected to remain in the green zone next week as an IMF loan is expected.

Analyst Faisal Irfan at JS Research said clarity on the political front, sharp appreciation of the rupee against dollar, and positive development on the IMF front led the market rally this week.

The week started with the announcement of the Election Commission's verdict on the foreign funding case against PTI, which reduced political noise to a considerable extent.

“We expect the market to remain in the green zone given hopes on loan disbursement from IMF once approval is granted by the Executive Board. Moreover, with the ongoing result season, certain sectors and scrips are expected to stay under the limelight given the anticipation of robust results,” said a report by Arif Habib Ltd.

The market commenced on a negative note this week given inflation for July 2022 came in at 24.9 percent. However, sentiments turned positive after IMF announced that Pakistan had fulfilled the last remaining pre-requisite for its loan (incremental hike in petroleum development levy on MS and HSD).

With this renewed hope, the rupee strengthened, gaining Rs15.33 (6 percent week-on-week) to close at Rs224.04/dollar this week.

July trade deficit also declined significantly, down 47 percent month-on-month.

Reduction in international oil prices post OPEC+ meeting (WTI trading below $88/bbl compared to $98.62/bbl last week) further cemented the ground for bulls.

Benchmark KSE-100 index closed at 42,096 points, gaining 1,946 points (up 4.9 percent) WoW. Average volumes clocked in at 263 million shares (up 75 percent WoW) while the average value traded settled at $34 million (up 56 percent WoW).

Foreign selling clocked in at $0.69 million compared to a net buy of $0.57 million last week. Major selling was witnessed in banks ($0.9 million) and fertiliser ($0.6 million). On the local front, buying was reported by brokers proprietary ($2.2 million) followed by mutual funds ($1.6 million).

Sector-wise positive contributions came from banks (427 points), cement (421 points), fertiliser (112 points), chemicals (111 points) and oil marketing companies (106 points). Stock-wise positive contributors were Lucky Cement (155 points), United Bank (124 points), MCB Bank (87 points), Pakistan State Oil (78 points) and Colgate (73 points).

Negative contributors were Close-End Mutual Fund (3 points) and Real Estate Investment Trust (1 point). Scrip-wise negative contribution came from Faisal Bank (10 points), Mari Petroleum (6 points), Interloop (4 points) and Adamjee Insurane (3 points).

Ali Najib at Topline Securities said the KSE-100 had a positive week, gaining 4.84 percent, as investors welcomed IMF acknowledgement regarding the completion of all conditions necessary to resume EFF programme.

In addition to this, consumer price index (CPI) of 24.93 percent (14 years high) numbers got released for the month of July 2022, ECP verdict regarding foreign funding case came out where ECP issued show cause notice to PTI, China’s rollover of $2 billion loan in safe deposits and decline in international oil and coal prices were the few significant happenings which influenced the market movement.

Bond yields on Pakistan's instruments also declined considerably this week, which added to the positive investor sentiments.

On the news front, cement dispatches declined 47.7 percent YoY during July, and petrol prices declined by Rs3.05/litre while diesel prices increased by Rs8.95/litre.